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🇮🇸 Iceland /Economy & Trade

Fee Increases Could Fuel Inflation

From Morgunblaðið · () Icelandic

Translated from Icelandic and summarized by DistantNews. Read the original for the full story.

At a glance

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  • Iceland’s proposed 2027 budget would raise various taxes and fees by 5.2%, while targeting a balanced budget and a surplus of several billion kroner.
  • Landsbankinn chief economist Una Jónsdóttir said the increases could push measured inflation higher and make it harder to reach the 2.5% inflation target.
  • She said the eventual effect will depend partly on government spending and fiscal restraint that could offset economic overheating.

Iceland’s proposed 2027 budget could make the fight against inflation harder, according to Una Jónsdóttir, chief economist at Landsbankinn. She said the planned increases would likely appear in inflation measurements around the turn of the year.

The budget proposal, presented by the finance minister, calls for various taxes and fees to rise by 5.2% next year. It also projects a balanced budget and a surplus of several billion kroner.

It is unfortunate to see such large fee increases, and they will probably show up in inflation measurements around the turn of the year.

· Una JónsdóttirThe Landsbankinn chief economist’s initial response to Iceland’s proposed 2027 budget.

Jónsdóttir said the increases match the forecast inflation rate for the coming New Year, but exceed Iceland’s 2.5% inflation target. “If we always have built-in increases that are higher than what is consistent with the inflation target, then it becomes extremely difficult to bring inflation properly down,” she told mbl.is.

She said the duration of the inflationary effect would depend partly on government spending and restraint measures. Those measures would need to counter the pressure and reduce overheating in the economy. For now, she said, the short-term effect would be a rise in measured inflation.

If we always have built-in increases that are higher than what is consistent with the inflation target, then it becomes extremely difficult to bring inflation properly down.

· Una JónsdóttirJónsdóttir explains why the planned 5.2% increases could conflict with Iceland’s inflation target.
About this summary

Originally published by Morgunblaðið in Icelandic. Translated, summarized, and contextualized automatically by DistantNews, with a note on how the source frames the story. Not individually reviewed before publishing. How this works.

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